Egypt

Egypt

Thinking Beyond Borders

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Introduction

Individuals are residents of Egypt for tax purposes if they meet any of the following conditions:

  • Egypt is their place of habitual abode
  • Individuals are resident in Egypt for a period more than 183 days, whether continuously or non-continuously, in a 12-month period
  • Egyptians who perform their services overseas and receive their income from an Egyptian treasury (public or private)

Based on the previously stated conditions, resident employees will be taxed on their total income whether generated in Egypt or outside Egypt so long as Egypt will be their center of their commercial or industrial or professional activities. Additionally, they will be taxed at the normal tax rates as follows:

  • The first EGP 6,500 of the taxable income is subject to tax at zero rate. 
  • 10% is applicable to taxable income between EGP6,501 and 30,000.
  • 15% is applicable to taxable income between EGP30.001 and EGP45,000.
  • 20% is applicable to taxable income between EGP45,001 and EGP 200,000.
  • 22.5% is applicable to taxable income in excess of EGP 200,000.

Non-resident employees will be subject to tax on Egyptian-sourced income at the normal tax rates mentioned above.

Income is considered Egyptian source in the following cases:

  • Income for services performed within Egypt, including income from salaries and wages.
  • Income paid by an Egyptian-resident employer, even if the service is performed outside Egypt.
  • Income generated from an Egyptian permanent establishment.
  • Dividends paid by an Egyptian resident corporate body.
  • Income from other business activities performed inside Egypt.
  • Capital gains derived from the disposal of securities, which are listed in the Egyptian Stock Exchange, and the capital gains derived from the disposal securities, which are not listed in the Egyptian Stock Exchange regardless of being listed or unlisted abroad.

It is the employer’s responsibility to withhold and remit the tax to the tax authority on a monthly basis within 15 days following the month of payment.

Income tax is levied at progressive rates on an individual’s taxable income for the year, which is calculated by subtracting allowable deductions from the total assessable income. 

Key message

There is no threshold/minimum number of days under the domestic tax law that exempts the employee from the requirements to file and pay tax in Egypt. To the extent that the individual qualifies for relief in terms of the dependent personal services article of an applicable double tax treaty, there will be no tax liability. The treaty exemption will not apply if the Egyptian entity is the individual’s economic employer.

Income tax

Liability for income tax

A person can be a resident or a nonresident for Egyptian tax purposes. A resident of Egypt is an individual who meets the residency rules set out above. If the residency rules are not met, the employee will not be resident for tax purposes in Egypt and will be taxed according to the declared tax segments which are:

  • The first EGP 6,500 of the taxable income is subject to tax at zero rate.
  • 10% is applicable to taxable income between EGP 6,501 - 30,000.
  • 15% is applicable to taxable income between EGP 30,001 to EGP 45,000. 
  • 20% is applicable to taxable income between EGP 45,001 to EGP 200,000.
  • 22.5% is applicable to taxable income in excess of EGP 200,000. 

 

Tax trigger points

For residents, total income derived from Egypt or outside Egypt if Egypt is their center of commercial or industrial or professional actvities, including allowances as well as all fringe benefits, will be subject to tax in Egypt. while non-resdients are subject to tax on Egyptian source income only. Foreign-sourced income that is not related to the employment relationship is not subject to tax in Egypt. 

Types of taxable income

Total compensation, including allowances as well as all fringe benefits, will be subject to tax in Egypt. Foreign-sourced income that is not related to the employment relationship is not subject to tax in Egypt while non-residents are subject to tax on Egyptian source income only. Foreign sourced income that is not related to the employment relationship is not subject to tax in Egypt.

Tax rates

  • The first EGP 6,500 of the taxable income is subject to tax at zero rate. 
  • 10% is applicable to taxable income between EGP 6,501 - 30,000.
  • 15% is applicable to taxable income between EGP 30,001 to EGP 45,000.
  • 20% is applicable to taxable income between EGP 45,001 to EGP 2000,000. 
  • Twenty-five percent is applicable to annual taxable income  between EGP 250,001 and EGP 1,000,000.
  • 22.5% is applicable to taxable income in excess of EGP 200,000.

Social security

Liability for social security

Social Insurance Law 79 of 1975 covers Egyptian employees as well as foreign employees whose countries have treaties with Egypt for reciprocal social insurance treatment.

Employers are required to withhold the employees’ social insurance contributions from their salaries and to remit them together with the employer’s contributions to the Social Insurance Organization on a monthly basis. The salaries and related benefits or emoluments are divided, forsocial insurance purposes, into a basic salary and variable elements. The maximum insured sum of the basic salary is at present EGP 1,120 per month (approximately USD 143), and the maximum insured sum of the variable elements is at present EGP 1,830  per month (approximately USD 234). Variable elements include the remainder of the basic salary if it is in excess of EGP 1,120 per month as well as overtime payments, bonuses, representation allowances, and similar emoluments. The maximum insured sum of the basic salary will be increased by 10% on 1 July of each year The variable amount will be increased each January with 15%. 

Expatriates are not required to pay social insurance. Instead, employers are required to pay 3 percent of the expatriate’s salary to cover work injuries. Expatriates are required to pay social insurance only if required under the terms of a totalization agreement concluded between Egypt and the employee’s home country.

Compliance obligations

Employee compliance obligations

It is the employer’s responsibility to file a quarterly tax return within one month following the end of each quarter. Employees are required to file tax forms only if they have income other than employment income in Egypt or the employer is non-resident for tax purposes or it has no permanent establishment in Egypt.

Employer reporting and withholding requirements

It is the employer’s responsibility to withhold and remit the tax to the tax authority within 15 days following the month of payment. Employees are required to report their income to the tax authority and remit the tax due on their income only if they are working for a  non-resident employer or the employer has no permanent establishment in Egypt.

Other issues

Work permit/visa requirements

A visa must be applied for before the individual enters Egypt. The type of visa required will depend on the purpose of the individual’s entry into Egypt. Additionally, employees are required to obtain work permits in order to start working in Egypt per the requirements of the labor law.

Double taxation treaties

Egypt has entered into double taxation treaties with more than 50 countries.

Permanent establishment implications

There is the potential that a permanent establishment could be created as a result of extended business travel, but this would be dependent on the level of authority the employee has and other factors which may need to be reviewed on a case by case basis.

Indirect taxes

General sales tax (GST) is applied at 10 percent. GST registration is required. 

Transfer pricing

Egypt has a transfer pricing regime.

  • The tax authority can adjust transactions between related parties if they involve conditions that would not be included in transactions between nonrelated parties.
  • This also will apply in the case of transactions whose purpose is to shift the tax burden to tax-exempt entities.
  • The transfer pricing guideline was issued by the Ministry of Finance at the end of 2010.
A transfer pricing implication could arise to the extent that the employee is being paid by an entity in one jurisdiction but performing services for the benefit of the entity in another jurisdiction, in other words, a cross-border benefit is being provided. This would also be dependent on the nature and complexity of the services performed and should be reviewed on a case-by-case basis.

Local data privacy requirements

Egypt has data privacy laws.

Exchange control

There are exchange control restrictions in Egypt. All transactions should be made through one of the country’s accredited banks. However, at present in Egypt, the approval of the Central Bank of Egypt to transfer foreign currency out of Egypt may be requested upon the submission of the supporting documents. This is intended to be a temporary procedure. 

Nondeductible costs for assignees

Nondeductible costs for assignees include contributions by an employer to non-Egyptian pension funds and hypothetical tax. These costs will be deductible by the employer where the tax is borne by the employer. 

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